The Effects of Institutions at the Establishment Level

Abstract

The previous chapters have examined the arguments espoused within the varieties of capitalism paradigm in terms of their validity, first, for comparative-advantage data and, second, for the spread of key labour-market institutions. This chapter examines more closely the effects of works councils and collective agreements — as well as the interactions between the two — on quit rates. It will also assess their effects on a number of personnel issues, such as, for example, the recruitment and retention of skilled workers. If the previous chapters examined some of the assumptions of the varieties of capitalism paradigm as well as the key final prediction (comparative advantage) of the varieties of capitalism paradigm, this chapter focuses more closely on some of the ‘intermediate products’ of works councils, collective agreements, and their interaction. In other words, this chapter focuses on their effects on quit rates and on personnel issues that are deemed to be of cardinal importance within the varieties of capitalism paradigm. The varieties of capitalism paradigm can be thought of as having two key stages: first, that institutions in co-ordinated market economies (CMEs) facilitate the provision of firm-specific skills that are a prerequisite for certain production strategies and, second, that these production strategies will lead to a comparative advantage in the production of certain goods.